Seeking a Worthy Container Line Stock ...

MarineLink.com
Thursday, June 20, 2013
OOCL Container Ship HK Harbour: Photo CCL

Asian container liner finances are put under the microscope in a recent Drewry Maritime Equity Research report.

It is a challenge to find an investable container shipping stock in the current environment. Most companies have seen their cash balances wither and total industry debt has more than doubled in the past five years to USD 100-bn.

Drewry’s analysis of the financial health of the industry paints a grim scenario for the global container liners with financial health under severe strain and shareholder value eroded. Most financial indicators point towards a greater need for the industry and in particular the listed carriers to get their house in order before it gets too late. If there is any positive aspect for the wider industry, the current financial pain will limit carriers’ ability to fight purely for market share. Drewry expects to see intermittent market-share campaigns but no single carrier can do it on a sustained basis.

Rahul Kapoor, senior analyst at Drewry Maritime Equity Research stated, “Even as the market awaits the fate of 1st July Asia-Europe GRIs, the sheer collapse in Asia-Europe freight rates in the past two months shows how fickle the industry's demand supply balance remains.  Short term, industry profitability has become highly volatile, driven not only by underlying supply demand dynamics but increasingly by carriers’ actions with respect to short-term capacity management. Accurate forecasts on a recovery in 2014 are especially difficult since the industry dynamics are highly fluid. Longer term, we expect the industry to be plagued by over capacity and the global supply/demand balance will not reach equilibrium until 2016.”

Kapoor continued “Lastly, peak season is a make or break for 2013 profitability. Freight rates have crashed on the key Transpacific and Asia-Europe trade lanes and there are few indications of a favourable demand environment. Carriers have a narrow window of opportunity to get their act together or risk severe losses as they are losing a lot of money at current rate levels. With no likelihood of an imminent demand surge, the only way to minimize losses is to address effective capacity immediately, or else any hope of full-year profitability can be written off after a very weak second quarter. Having said that, carriers can still expect to achieve GRI success outside of supply/demand fundamentals, if they were to take a hard-line and aim for profitability.”

Drewry Maritime Equity Research’s top stock currently, with an attractive valuation and positive outlook, is Orient Overseas Int Ltd (316 HK). Whilst also taking a cautious view on both Neptune Orient Lines (NOL SP) and China Shipping Container Lines (2866 HK).


 

Maritime Reporter March 2015 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

US Navy: Future USS John Finn (DDG 113) Launched

The future USS John Finn (DDG 113) was launched at the Huntington Ingalls Industries (HII) shipyard March 28.  During launch the drydock was flooded allowing the

WISTA AGM to Address Emerging Shipping Challenges

WISTA USA (Women’s International Shipping and Trading Association) is putting the final touches on a high-profile speaker line-up that will headline its upcoming

WOW at USMMA

The United States Merchant Marine Academy Hosts 7th Annual Women on the Water Conference. Last week, The United States Merchant Marine Academy (USMMA) in conjunction with the U.

Finance

Sea Star Continues Puerto Rico Investments

Sea Star Line, LLC has entered an agreement to on-hire another barge to add to its current service package for shipments from Jacksonville to Puerto Rico.   The

Rand Logistics Announces Debt Refinancing

Rand Logistics, Inc. announced today that it has closed a $170.0 million revolving loan facility which refinanced approximately $102.0 million of the company's

Baltic Sea Freight Index Edges Higher

The Baltic Exchange's main sea freight index, which tracks rates for ships carrying dry bulk commodities, edged higher on Monday as rates rose for vessels across all segments.

Container Ships

Sea Star Continues Puerto Rico Investments

Sea Star Line, LLC has entered an agreement to on-hire another barge to add to its current service package for shipments from Jacksonville to Puerto Rico.   The

Maersk to Install Transas ECDIS on 100 Vessels

Maersk Line, the world's largest container company, has selected Transas Marine for ECDIS implementation on more than 100 vessels, Transas announced today. The

Syria Taps World Wheat Market as Stocks Run Down

Weeks after Syria said it had no need for wheat imports, the government plans to import 150,000 tonnes and has introduced ways to conserve grain stocks in signs

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Naval Architecture Navigation Offshore Oil Pod Propulsion Ship Electronics Ship Repair Shipbuilding / Vessel Construction Sonar
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1890 sec (5 req/sec)